Tata Capital new branch opened, to offer all financial products under one roof

A new branch office of Tata Capital Ltd has been opened in Kalyani Nagar. Recently Tata Capital as its strategic policy has increased its Consumer Finance and Advisory Business (CFAB) with an aim to strengthen the company’s commitment of customer centricity and service excellence stated a company release.

Jamshed S Daboo, head-CFAB, Tata Capital, told, “The single window concept is an empowered business model for streamlining all our retail offerings into a common branch network and common sales force. At the heart of the CFAB lies the concept of presenting the ease and convenience of a one-point interface to the customer. Among other advantages, a unified structure will allow us to understand the financial needs of the customer better and help us build deeper relationships.”

The Pune branch has been opened keeping in mind one-stop shop concept to provide all financial products to the customers under one roof. The customers will be able to shop for consumer loan products and investment advisory services. The release stated the financial products will include home loans, auto loans, personal loans, educational loans, loans against property, financial advisory services and equity trading. Working on its expansion plans in the first phase, the company will be covering 65 cities by opening a chain of around 110 branch offices.

RBI to issue norms on bank execs’ salary

The Reserve Bank of India moving in line with other regulators in the West, will be issuing guidelines to standardize the pay of senior executives of private and foreign banks, as in the West some banks have come under attack for offering generous compensation packages to staffers.

After the financial crisis the compensation packages given to the staffers are being scrutinized closely, especially in the West. The RBI has pointed out that the principles of Financial Stability Board (FSB), a global supervisory body comprising senior representatives of national financial authorities, which have been approved by G-20, should be used as guiding principles for working out the compensation schemes for all employees in a financial institution.

The senior bank official informed that RBI will soon issue broad norms on compensation policies and might not limit pay. But there are chances that bonus payments might be delayed. For instance, recently in case of ING Vysya Bank, RBI did not approve the pay package of Gautam Vir, former CEO of Development Credit Bank therefore Mr Vir did not join ING Vysya Bank.

At present there are no formal guidelines for salary packages for private banks. Now before giving its approval for the packages of bank CEOs, RBI looks at the profitability of banks, key financial ratios and reputation. According to the Banking Regulation Act, any compensation to directors must be approved by the central bank. In August 2003 the regulator had issued specific guidelines for bonuses of private sector bank CEOs. According to the RBI circular, the annual bonus can either be a maximum of 25% of the salary or the average bonus paid to employees, provided there is more than a single category of employees, excluding the top management, who are eligible for variable performance bonus.

R Suresh, managing director, Stanton Chase, stated that RBI always had guidelines on compensation but it did not provide any easy or fraudulent means for senior professionals to show high short-term profits. Among the important parameters RBI can take measures are long-term performance and performance linked to a broader set of criteria.

On the other hand banking sources pointed out there are no specific guidelines on salaries and bonuses of foreign bank CEOs, but these have to be approved by RBI. However the bonus pool of foreign bank CEOs is based on a host of factors, including profitability of the franchise, compliance and control, relationships with key regulators, contributions to the franchise, etc. Also the bonuses of some foreign bank CEOs are 2-3 times their base salaries which in recent times have been delayed.

While among the CEOs of private banks, Romesh Sobti of IndusInd Bank is withdrawing a salary of Rs 2.44 crore, Shikha Sharma of Axis Bank (Rs 2.21 crore), Chanda Kochhar, ICICI Bank (Rs 1.96 crore) and Aditya Puri, HDFC Bank (Rs 1.74 crore). In contrast to this the pay packages of CEOs of public sector banks are much lower at Rs 12 lakh.

Mark Robinson, CEO, South Asia, Citibank said, “The policy is not explicit... it is more of a principle of what it should be. Maybe it is hinting at a compensation aligned with the risk and return as practiced in developed markets, which makes perfect sense. But there are no specifics mentioned in the policy and so we are awaiting further clarity from the RBI.”

As per the norms recommended by FSB, a considerable portion of compensation of senior executives, whose actions have a material impact on the risk exposure of the firm, should be variable.

It also suggested that a significant portion of this variable compensation must be paid on deferral arrangement.

ICICI Bank launch special scheme for new home loan borrowers

ICICI Bank, India’s second largest lender has announced a special scheme for new home loan borrowers. The special scheme will has come into effect from August 20.

According to ICICI Bank spokesperson under the special scheme the bank is offering 8.75 per cent interest rates for home loans up to Rs 20-lakh.

For the loans between Rs 20-Rs 50 lakh bank is offering 9.25 per cent interest rate whereas for loans above Rs 50-lakh, the rate is 9.75 per cent.

New clause empowers banks to recover outstanding amount from the salary of credit card holders

ICICI Bank country’s largest private sector lender has added a new clause in the credit card ‘terms and conditions’ for the recovery of dues from credit card customers. The new credit card terms and conditions after the inclusion of new clause have come into effect from July 23, 2009. Soon other banks are expected to adopt this new tool. By adopting this new tool the banks in order to recover dues from credit card customers can ask the employers to deduct the outstanding amount from the salary.

According to the new clause the employees who have defaulted on payment cannot object on the deduction of dues. These deductions will be passed to the bank and will continue till the entire amount is recovered.

After the inclusion of the new clause the ‘terms and conditions’ say that "no law or contract" governing either the card holder or employers can prevent the bank from carrying out such deduction and subsequent payment by the employer to the bank.

The ICICI Bank spokesperson has confirmed the introduction of the new clause. The spokesperson told the reporter, "This clause is applicable only for customers who default on their credit card payments. Prior notice has already been sent to all our customers to make them aware of this clause".

He stated, "Only the defaulters in repayment need to be concerned and it is not of concern to regular customers".

With the inclusion of this clause, ICICI Bank is now "entitled and authorized to contact and require the card holder's/card member's employers to make deduction/s from the salary/wages payable by the employer to the card holder/card member and to remit the same to ICICI Bank until all of the card holder/card member dues outstanding from the card holder/card member to ICICI Bank is/are completely discharged."

In addition to this according to the new clause, bank will have the right to decide upon the quantum of the deduction.

The revised terms and conditions of the bank specify, "The deductions shall be of such amounts, and to such extent, as ICICI Bank may communicate to (and instruct) the card holder's/card member's employers".

It further adds, "The card holder/card member shall not have, or raise/ create any objections to such deductions. No law or contract governing the card holder/card member and/or the card holder's/card member's employer prevents or restricts in any manner the aforesaid right of ICICI Bank to require such deduction and payment by the card holder's/card member's employer to ICICI Bank".

ICICI bank to pay Rs 1 lakh for enhancing interest rate of home loan

In a judgment given by the consumer forum on the complaint filed by the Panchkula resident Birbhan Goyal, said the increase in the rate of interest in case of home loan is unlawful and unjustifiable. The forum imposed a penalty of Rs one lakh, which the bank will have to pay to Goyal, and said, “The bank is directed to overhaul accounts of all its loanees and bring the rate of interest at par with those at which the loan (home) is advanced to new customers from time to time, so that all its customers, whether old or new, who have opted for adjustable rate of interest pay the same rate of interest during any particular period.”

In its decision the forum headed by Jagroop Singh Mahal stated the finance company and the bank have adopted unfair trade practice. The forum held, “Whenever enhancement takes place, the rate would not be more than that at which loans are being advanced to new customers, meaning thereby that if after enhancement, loan is advanced to any new customer at a lower rate, the rate of interest of the complainant and all other loanees would also come down to the same level.”

Goyal completed all formalities required to get a loan signed an agreement with a home finance company and the bank. On this a loan of Rs 37 lakh was sanctioned which was to be paid in 180 installments in a period of 15 years, and thereafter he started paying the installments from March 2005 onwards on a regular basis. However in August 2008 he received a letter, on reading he was surprised as it stated that the repayment schedule through EMIs was being revised to increase the repayment time from 180 to 502 months. On reading this he immediately contacted the bank’s local branch and requested for the cancellation of the payment rescheduling but bank did not conceded to his request.

ICICI Home Finance Company Ltd and ICICI Bank Limited while denying the allegations, in their written reply appealed that the complainant had opted for floating rate of interest and due to increase in it, they had increased the tenure of repayment of monthly installments in order to reduce the financial burden on Goyal.In his argument Goyal’s counsel before the forum stated that the finance company and bank have adopted unfair trade practice by increasing rate of interest for old customers at a higher rate, while the current rate of interest was much lower, which was illustrated through their announcements and advertisements in the newspaper to attract new customers. After hearing the pleas, of both the parties the forum held that the interest rate of any old borrower would be lowered to bring it at same level with the interest rate at which the loan is being offered by the bank to its new customers.

RBI suggested evaluate telemarketing used by pvt banks

Today banks are using telemarketing as a tool for the marketing of their products. While rejecting a bail application of an accused working with BPO the Delhi court has recommended the Reserve Bank of India to review the telemarketing done on behave of the banks. The court said cases of innocent consumers being cheated through impersonation has come to light.

Additional Sessions Judge Surinder S Rathi stated, "This is high time that steps need to be taken to review whether telemarketing is a healthy or indispensable marketing tool for banking sector in view of its ill-effects."

The court pointed out the banking sector in general and RBI in particular cannot make an exception to the troubles of "helpless victims who are duped by unrepentant cheats."

The court stated, "The unscrupulous elements of our society have got an opportunity to cheat innocent citizens in this manner perhaps because of new fad of telemarketing being taken up by many private banks and lending institutions".

It further added for a common citizen it is not only difficult but rather impossible to distinguish between an actual bank employee and an impersonator.

The court's comments came while dismissing a bail application of Imran Khan who was charged for cheating a complainant Gaurav Tyagi of Rs 1.09 lakh on behalf of providing him pre-approved loan of Rs 8.5 lakh by ICICI Bank Ltd.

ICICI restructure its retail strategy to target more consumers

ICICI Bank Ltd India’s largest private sector lender by assets is restructuring its retail strategy to curb the current slowdown in consumer spending.

Till now the bank’s consumer business model was mainly targeted to aggressive growth in its loan book. But, as Asia’s third largest economy has slowdown and consumers are focusing more on saving than spending, ICICI Bank has started trailing retail deposit liabilities instead of loan assets.

For this the bank has also set up a task force headed by the executive director V. Vaidyanathan to control expenses and reduce waste. Another most important part of the bank’s strategy is to bring back the customers back to its branches. It has almost stopped calling the prospective customers on the phone to offer loans, but it will depend on branches to send short messaging service and emails to seek business.

Vaidyanathan informed, “We see robust activities in the liabilities market now. Until recently our savings account base has been growing at over 30% year-on-year. Our CASA (current and savings accounts) has grown from 18% a few years ago to 28% of the liability base. We plan to take it to 35%”.

According to government prediction India’s economy is to grow 7.1% in the fiscal ending March, the slowest rate in six years. But banks have become cautious on lending to consumers because of fear about a possible increase in defaults as employers are freezing or cutting salaries and put hiring on hold.

According to analysts loan collection and asset repossession have also become difficult. An anonymous banking sector analyst at a Mumbai-based brokerage said, “A few bad customers are hurting all borrowers”. “Hence, in such an environment the bank focuses on high-income category customers who are the least prone to default and litigation (rather) than the marginal middle-class customers who are the first to be hit by the changing economic environment.”

Vaidyanathan pointed out, ICICI branches are being recast to carry out the change. He added, “Branches don’t just do servicing; they now do relationship management. The systems and physical layout of the branch is being changed to accommodate this new requirement”.

In a year’s time ICICI Bank branch network has increased to 1,400 from 750 and will be adding around 2,000 branches in the next one year. To get customers back to branches, the private sector bank has launched a program called “Just Step In”. Vaidyanathan added, “It’s an investment for the future. We feel, therefore, there is more work to do on the cost front, to neutralize the impact of branch expansion”.

Explaining about the expense control exercise as “reallocation of resources to the new growth areas” and “merger of structures”, he told the bank has reduced the number of people who act as mediators for selling loans.

Vaidyanathan pointed out, “We don’t make outbound calls any more. Over the past one year the bank has stopped telecalling. We have been using the alternate channels like branch, short messaging service and emails”. The bank has reduced outbound calls by 95%.

In the retail loan segment, ICICI Bank has slowed down on unsecured loans such as credit cards and personal loans and is focusing more on secured loans such as mortgages and auto finance.

Vaidyanathan added, “We love mortgages and auto loans in particular. These are long-term businesses. Considering the stiff underwriting standards, these will ride out any credit cycle”.

As per his information on an incremental basis, unsecured lending is only 3-5% of the overall loan book has sharply come down from 19% earlier. In 2007 when interest rates were rising ICICI Bank began tightening its credit norms in 2007.

Vaidyanathan informed, “We dropped a few unsecured products along the way”. Bank is also firming up its credit card base and encouraging customers to use debit cards more than credit cards. Vaidyanathan is sure that card diffusion will increase and “electronization is an unstoppable phenomenon,” but acknowledge that “at this point in time we are cautious on credit cards, and pushing spends on debit cards instead”.

Thus bank’s debit card volumes have moved up from Rs 250 crore per month to about Rs400 crore per month due to focus on increasing the usage of debit cards, while credit card spending is still at Rs1,000 crore per month.

Vaidyanathan informed to help its customer’s bank has started an education series and this has helped reduce customer complaints by 50%.

He further added, “There is a huge change in customer expectations. Customers that were borrowing to meet their present needs are now looking to save for their future. They now need financial planning services which we are also encouraging”.

Vaidyanathan informed the new branches are being opened up by the bank are being spread across rural and semi-urban areas, to tap the local population for deposits. They are also looking for opportunities for government business such as tax collection and salary accounts of public sector companies to strengthen the bank’s already strong presence in sectors such as information technology and related services.

ICICI sacked dealer for indulging in forex fraud

ICICI Bank took a strict action against one of its dealers by sacking it for indulging into improper forward trades as it executed deals to favor four Kolkata-based corporates. According to this deal these companies might possibly buy or sell currency at exchange rates which were more attractive than what they would have been offered in the regular course of business.

Bank has reported the incident to the Reserve Bank of India, and will be filing a complaint this week with the Mumbai Police against the dealer and the corporates. According to sources the dealer took the advantage of a glitch in the bank's software which detects variation in pricing up to the second decimal point. However, further deals have been strike at extremely fine rates running up to four decimal points.

The employee had smacked deals by making certain that the corporates received favorable rates by tinkering with the last two digits in the forex rates, which is typically as 46.4534 or 28.6751. The software did not pop up an alert message when these transactions were done as the first four digits the same. The deals were carried out in Japanese Yen, Euro and dollars. Moreover the dealer used his official prudence to improve the rack rates.

It is alleged that the dealer might have received a payment from the four unlisted corporates. Bank officials stated the fraud could not be computed as the impact was a reduction in notional profits on several forex deals over a period of time. The bank got suspicious that something is wrong therefore started investigation of the matter in December. The trader was suspended last week.

A senior bank official pointed out that bank got suspicious when it discovered that the dealer, who was a relationship manager for the global market division in Mumbai, was executing trades for a group of Kolkata corporates. Such transactions are not carried out unless the company concerned is very big. The official was moved from Kolkata last year. A bank official informed that the fraudulent trades could not be enumerated as the dealer had diverse his trades.

The official further informed, “However, on the back of the trades which have gone through the system, we feel that it is only of a small amount. The fraud was detected immediately because the systems were in place”. The official told that it is not possible to do deals which are out of sync with the market as the software would have picked it up immediately.

The bank believes that the four corporates were acting in concert. “While questioning, the dealer said he had taken a loan of Rs 10 lakh from two of these corporates and it is in his mother's account,” said the official.

Agreeing the fine margins in currency trading, a Euro 10-m transaction possibly would have generated improper gains of Rs 2.5 lakh for the dealer. It means the gains would be higher in the case of forward deals on the pound and lower in case of dollar.

After the fraud, the bank has tightened its internal systems. It has also started random checks on all dealers. A few years ago, ICICI Bank was hit by a fraud in the reserves. At that time, two currency traders of the bank had built up high points in Euro, betting on its rise. As the Euro slipped against the dollar, the traders bought more and resulted in fabricated, reverse deals to hide the excess trading. The irresponsible trading desecrated not only the dealers' trading limits, but also moved the bank’s up “overnight position” in foreign exchange beyond the level allowed by the Reserve Bank of India (RBI).

Unknown person misused debit card made lakhs of rupees purchasing

An unknown person has been booked by the Chatushrungi police allegedly for using a fake debit card and withdrawing over Rs 7 lakh from the ICICI bank account of Jitendra Kanetkar, working as a manager in a private firm in Aundh.

As per information provided by sub-inspector Shaukatali Sayed, Kanetkar and his family had gone for a trip to Guhagar between January 1 and 5. When he returned, he tried to pay the house rent online but was unable to log into his bank account. Therefore Kanetkar made a complaint to the bank's call centre and requested for the reactivation of his password, but was told to make a written request to the bank to get a new password.

On January 10 Kanetkar received his new password, even this did not work. He then asked the bank to freeze his account till his password is activated.

Sayed told that Kanetkar received a letter from the bank, dated January 12, stating that a debit card had been issued in his name on January 6 and that his mobile number had also been changed.

Kanetkar got suspected that something is wrong hence he obtained a statement of accounts from the bank and found that over Rs 7 lakh had been withdrawn. Thus he got a complaint registered of cheating with the police under section 467 and 420 of the Indian Penal Code.

Sayed said on investigation, it was found that the unknown person had withdrawn huge amounts from various ATMs by using the debit card between January 8 and January 12.

From investigations it was also discovered that the suspect had made purchases of around lakhs of rupees from various shops. Sayed told the police is trying to track down the suspect.

Fraudsters used details essential for phone banking to obtain duplicate credit cards

An executive of a city real estate firm month back discovered that more than Rs 50,000 was fraudulently withdrawn from his credit card account. He was sure he had neither misplaced the card nor lost it.

After a month long investigation police was able to find a unique technique used by the fraudsters. With the support of a section of bank employees, they were able to obtain a primary database of the customers. They obtain the answers to the security questions essential for phone banking and used these details to get a duplicate credit card.

Such fraudsters approached the customers on allegedly of increasing credit limit or to give a new card and get a fake application form just to collect security questionnaire details and know a customer's particular card number.

After this, fraudsters would call up the phonebanking official and inform about a change in address. After changing the address, fraudsters would keep quiet for a month or two. Then they again call up the phone banker to report about losing the card. They would ask the bank to send a card to the new address.

Swamped with such complaints, police have asked banking organizations to verify the changed address physically. On Wednesday, state Criminal Investigation Department (CID) and ICICI bank jointly organized a workshop for their officers and had discussion about the changing modus operandi of the fraudsters. P. Nirajnayan, IG -II, CID asked the banks to take more stringent security measures about security questionnaire, which is practically the password of any account.

A senior police officer informed, "Generally, the security questionnaire contains four questions mother's maiden name, date of birth, address and the card's expiry date. We asked the banks to change the pattern of the questions in regular interval to prevent fraud".

ICICI plans New Year gift by slashing rates by 50-75 bps

ICICI Bank, the country’s largest private sector bank is planning to cut interest rates by 50-75 basis points across the board in the new year which will make home and car loans cheaper. A senior banker informed with direct knowledge of the development, the rate cut will happen “very soon” — maybe early next month.

However, ICICI bank will not do phased reduction in rates unlike its rival HDFC Bank. “Whatever reduction they go in for, it will be at one go,” the banker told ET. At present ICICI’s prime lending rate (PLR) is 14.25%. Its home loan range extends to 11.5-12.25% for floating rates while the fixed rate is around 15.5%. In car loans, ICICI’s average is around 15%.

ICICI will implement rate cut uniformly to all its businesses. This would mean it will also make home loans and car loans cheaper. It would be quite different from HDFC Bank, whose rate cut left the home loan segment untouched because it’s under HDFC, which owns 19.4% stake in HDFC Bank.

The decision to reduce interest rates will come in support of the Reserve Bank’s cut in the repo and reverse repo earlier this month. However, some public and private sector banks have already announced rate cuts. Union Bank of India was the first to announce reduction in PLR by 0.75 percentage points to 12.5%. HDFC Bank followed by reducing 50 basis point. The cut by HDFC Bank has been announced in two trenches of 25 basis points each, the first from December 15 and the second from January 1.

This year ICICI’s retail business saw a growth of around 5%. In contrast, its corporate business has grown at a 10-15% clip.

Although the corporate business is much smaller currently, being less than half of the retail business. The spiffy growth in the corporate business has generated rumor that ICICI might focus more on that segment but the bank says there is no intention to give less attention to retail business.

At present home loan rates across various banks stand around 10.5% for sub-Rs 20 lakh loans and around 12% for above Rs 20 lakh loans. On the other hand car loans stand around 12.5-16% depending on loan profile and kind of model chosen.

Interest rates likely to contract to five per cent by the end of December

According to economists inflation has slopped down significantly to 6.84 per cent joined with falling oil prices may probably prompt more lending rate cuts upto one per cent by Banks

Bank of Baroda's Chief Economist, Rupa Rege Nitsure said, "The current fall in inflation would put more pressure on banks to bring down their interest rates by additional one per cent across the board by March. There is a strong southward bias".

India's heading inflation dropped to a nearly nine month low of 6.84 per cent primarily due to cut in domestic fuel prices after nearly 20 per cent decline in the global crude oil prices and declining prices of vegetables, fruits, pulses and iron, steel items.

Most of the state-owned banks and a few private sector banks are slashing their prime lending rates after RBI's monetary measures rate and finance ministry’s calls for immediate rate reductions.

Nitsure said many private leading lenders including ICICI Bank are yet to decide on revising their rates and they might have to take a call now due to the steep fall in inflation.

IDBI Gilts' Economist, Amol Agarwal said monetary policy makers in the Reserve Bank might have to face different challenges if the pace of fall in the heading inflation continues in the remaining part of this fiscal.

"The inflation at current level (6.84 per cent) is good as it has been the policy Endeavour of the Reserve Bank in the past few months. However, if the decline in the inflation continues in this pace, that may pause policy hurdles by mid-next year," Agarwal said.

Inflation escalated to multi-year highs (around 13 per cent) early this year. Thus high inflation and uncertain liquidity conditions impelled the RBI to infuse above Rs 3 lakh crore liquidity into the system.

By looking at the current conditions, the inflation is likely to contract to five per cent by the end of December and to zero by mid-next year, and this might put pressure on private banks to cut down their lending and deposit rates, the Chief Economist of a leading private sector bank said.

"Interest rates will come down in the next few months, also among the private sector banks as they would, otherwise, face low demand for their products," he said.